Reflections on Growth Cycles, Payments & More

Reflections on: Tech-Driven Growth Cycles, the Next Age in Payments and Strategy & Execution

Several months ago, January 2023 to be exact, I left my role with #Infinicept. As last year wound up, there was a collective readiness for new directions. Thank you to Infinicept co-founders Deana Rich and Todd Ablowitz for being supportive in our parting moments, the opportunity to build Infinicept together and making  #embeddedpayments a permanent fixture on the Fintech map.

During this sabbatical, I’ve been re-energizing and diving into several related topics:

• Tech-Driven Growth Cycles

• The Next Age of Payments

• The Interconnectivity between Strategy/Execution 

Tech-Driven Growth Cycles 

I am reading and researching a lot on economic cycles and the principles underpinning the rise and fall of industries and economies- company growth and decline cycles, economic cycles, the ebb and flow of opportunity. If you’re into that sort of thing - strongly suggest you check out Ray Dalio’s Principles for a Changing World https://www.economicprinciples.org/DalioChangingWorldOrderCharts.pdf

 which was enlightening and useful to help understand a rapidly changing and volatile macro economic environment. 

As I ingested his views on the inevitable phases of the long term debt cycle (boom and bust), those ideas got me thinking about a lot of things, including where we are in the Payments growth “cycle”, and more broadly got me conceptualizing about how such a model can apply to any tech-driven growth industry segment.

Here’s my growth cycle framework in a tech-driven growth industry such as payments, structured along a uniform set of “principles” (thanks Mr. Dalio for the inspiration):

1) an inevitable set of growth and decline stages, 

2) three categories of Participants -Market Leaders/Players/Pretenders  

3) a growth cycle period lasting 12-15 years (give or take)

These cycles repeat themselves within an industry segment; sometimes incumbents are ousted, other times they ride the next wave of growth and addressable opportunity.

The tech-driven growth cycle ultimately results in a situation where a relatively few Market Leaders enter what I’m calling  the Market Setters phase (“they set the market”) and dominate 50-70% of an addressable market opportunity (in our case, payments).  I’d say no more than 4-5 firms end up in that position for a defined segment. They still show outsized growth, as the nominal size of the opportunity may expand.

Today for payments, think of our Market Leaders now in a Market Setting position; I don’t think you’d get a lot of pushback identifying Stripe, Adyen, Worldpay, FirstData, and Global Payments as our Market Leaders and “setting the standard” in the payments industry. (btw, chart below is representative in nature and not intended to be prescriptive)

Tech Driven Growth Cycles for an Industry Segment

Then there are a number of what I call Players existing as segment specialists, supporting actors, or those which are lesser tier alternatives to the Leaders. Their count may be a few dozen or even highly numerous, but the overall economic opportunity they harvest in the segment is a small fraction relative to the size of addressable opportunity dominated by the Market Leaders. 

By the way – let me be clear: there is nothing wrong with being a Player!  Lots of good businesses grow consistently, are profitable, stable and operate out of the limelight which are not Market Leaders. 

Pretenders - maybe that’s a harsh term - but these are the firms that have lots of promise, try real hard, perhaps bring new innovations to the segment  but ultimately do not survive for one reason or another.

Where are We Now? 

I’m going to propose that for most of us, we would have experienced, or are familiar with, the following growth chapters in Payments over the last forty years: 

My representation of the last 40 years of Fintech "Ages" aka Growth Cycles

1) Electronification of Payments, 

2) the DotCom / eCommerce Cycle, 

3) the “API-Ification” of Payments. 

In my view, we are in the final stages of Scaling and Growth in the API-iFication of Payments cycle and entering the Clear Out stage.

So what’s going lead the next Payments Growth Cycle? The back half of 2020s and into the 2030s is going to be defined by the application of AI and the broader deployment of decentralized platforms. Erin McCune from Bain eloquently notes in her article https://www.linkedin.com/pulse/generative-ai-implications-payments-industry-erin-mccune

specific use cases where AI can deliver immediate value. The deployment of AI was something we also noted at the Fintech Meetup last month in Las Vegas.

As for Decentralized Finance (DeFi) and underlying distributed ledger systems, I would say the following look like the break out applications:

• Public/private chains for value transfer (e.g. Ripple) and transparency/supply chain (e.g. HyperLedger), 

• International transfers, remittance

• CBDCs (Central Bank Digital Currencies), 

• DeFi applications tapping into value of alternative assets, 

• Purpose built risk / compliance / cybersecurity management solutions for distributed systems

Great, now we know where we have been, where we are, and where we are going. Now I can turn my attention to less existential matters and give some thought to another topic which keeps my motor running...

Growth+Strategy+Execution

With more experience - and a share of failures and successes, I continue to develop a greater sense of clarity and profound appreciation for the foundational axiom that Execution and Strategy need to perpetually and consistently linked. Good strategy and good execution are the principal inputs into the Growth equation, whether at the corporate or initiative level.

Growth is a tarnished concept right now, associated with recklessness and indulgence. All hail the new idol of Efficiency! Yes, tough times require trimming of the initiative board. But over the last half decade, how many of us didn’t grow responsibly, didn’t execute as well as we should have, or had wildly misinformed assumptions in our strategies which we failed to address?  

With those thoughts in mind, I’ve been thinking about the relationship between Growth and Strategy along the following matrix framework (see below) - this type of mental model helps me think about ways to help guide constructive approaches to addressing problems.

Growth Matrix - an Overlay of Strategy & Execution

One way to think about the relationship between Strategy & Execution

Execution is hard; it’s grindy, it’s working with diverse stakeholders, and engaging with people often with vastly different points of view than your own. Adhering to a strategy is a function of consistency and can be quite boring. Strategy guides and informs execution, but it is not a one time exercise. Execution provides signals, which validate or refute the variables and assumptions in your strategy, requiring management to reevaluate and possibly course correct with minor or (far less frequently) major adjustments. 

In fact, that sounds like a cycle! 🙂

Thanks for checking out my article. I plan to release a series of posts on “G/S/E”  (Growth / Strategy / Execution)...